Bank of America (BofA) has changed the Mexican economy’s growth forecast to -4.5%, compared to the previous estimate of a 0.1% drop, in the context of a global recession due to the coronavirus and a large drop in GDP in the United States for the second quarter.
Despite negative forecasts, Bank of America expects an uptick of 2.5% of the country’s economy by 2021, despite the previous growth estimate of 1.8% for that year, since the main factor that has developed the crisis, coronavirus, is temporary, even if it persists for several months.
Read: AMLO rules out fiscal stimulus as aid for coronavirus involvement in The Mexican economy
Impact on production
Also, Bank of America Global Research’s report on the Mexican economy highlights that the devaluation of the peso can help the country recover faster from this health and economic crisis.
“Mexico faces a negative impact from the closure of several companies around the world. This has started to affect the Mexican industry and will continue to impact the country’s production for a few months,” the document explains.
The firm also notes that the Aztec country also faces a negative impact on external demand, as slowing global growth will lead to a worldwide recession.
Oil fall, another factor
Regarding the fall in US GDP in the second quarter, Bank of America has noted that while it will not affect demand, it will primarily affect Mexican remittances, due in part to falling crude oil prices.
Find out: Treasury recognizes that coronavirus did affect economy and could affect it more
“Mexico is a crude oil importer right now, but after the collapse in oil prices it is likely to damage the conditions for the country to negotiate imports of gasoline,” the bank said.
On the other hand, Bank of America notes that an increase in global risk has tightened financial conditions, which has halted flows for emerging markets, including Mexico.
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